Spain prepares curbs for renewable energy subsidies

Spain plans to set the return earned by renewable energy at 7.4 per cent, moving to curb subsidies to an industry that got 50 billion euros ($77 billion) in the past decade, according to draft rules seen by Bloomberg News.

The rate on investment for clean-power plants was based on the average interest of a 10-year sovereign bond plus 3 per centage points, according to the regulations that still need final government approval. The more than 1,000 pages of rules cover electricity from renewables such as sunshine and wind, as well as industrial co-generation and waste.

Successive Spanish governments have struggled to give financial incentives to clean energy without passing on all of the costs to consumers. That built up a debt temporarily borne by utilities, though under government guarantee, potentially eroding the credit strength of both.

Prime Minister Mariano Rajoy's Administration has killed subsidies for new plants and scaled back those for existing facilities, and this latest move will put them on a traditional rate pegged to their cost of investment.

The new rules set up hundreds of parameters for calculating cost bases. They include type of technology and connection to the transmission network as well as the year the facility entered service.

The regulatory changes are part of a series made in recent years “to achieve the economic and financial stability of the electricity system and avoid the inclusion of new costs,” the government said in the draft. Calls to the industry ministry seeking comment today weren't returned.

Wind-energy response

The Asociacion Empresarial Eolica, a wind-energy trade group, criticised the draft, calling it a “sacking” of the industry and saying wind energy was hurt more than others. About 37 per cent of installed wind turbines will lose premium payments, while the rest will see their earnings reduced 50 per cent, the group said today in an e-mailed statement.

Solar energy in Spain became a lightning rod for both developers and critics, as photovoltaic rooftop and stand-alone installations gained a higher relative per centage of subsidies, or about 30 per cent of the 8.6 billion euros paid in 2012.

Solar supplied 8,160 gigawatt-hours to consumers in 2012, or about 8 per cent of total energy generated by the major clean- energy groups.

By 2013, photovoltaic plants had grown to about 60,600. More than 99 per cent entered into service within the last 10 years, according to the draft regulations. That has left Spain with an installed base of 4,600 megawatts of solar, or about 12 per cent of the total installed base for renewables, co- generation and waste.